Adverse Selection and an Individual Mandate: When Theory Meets Practice

Martin Hackmann, Jonathan T. Kolstad and Amanda Kowalski

American Economic Review, 2015, vol. 105, issue 3, 1030-66

Abstract: We develop a model of selection that incorporates a key element of recent health reforms: an individual mandate. Using data from Massachusetts, we estimate the parameters of the model. In the individual market for health insurance, we find that premiums and average costs decreased significantly in response to the individual mandate. We find an annual welfare gain of 4.1 percent per person or $51.1 million annually in Massachusetts as a result of the reduction in adverse selection. We also find smaller post-reform markups. (JEL D82, G22, H75, I13)

JEL-codes: D82 G22 H75 I13 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/aer.20130758
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Citations: View citations in EconPapers (102)

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Related works:
Working Paper: Adverse Selection and an Individual Mandate: When Theory Meets Practice (2013)
Working Paper: Adverse Selection and an Individual Mandate: When Theory Meets Practice (2013)
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